Sheena Stow-Smith from PensionHelp answers reader questions how minimum drawdowns impact Age Pension entitlements.
Q: My question is in relation to the Age Pension entitlement amount for my parents. My parents’ minimum drawdown amount from their super pension was 7% per year, now it’s dropped to 3.5%.
- Does this affect the amount of Age Pension my parents receive per fortnight? They receive the minimum amount for Age Pension.
- Can my parents access more than 3.5% of their super pension account balance per fortnight without affecting their Age Pension?
A: In answer to your first question, generally, no. The income actually received from super does not impact the Age Pension.
In answer to your second question, yes. There is no upper limit on the amount you can withdraw from a super pension account.
For the Age Pension means tests, super for those over age 67 is an assessable asset and is generally deemed under the income test.
If your parents have commenced an income stream from their super:
- The balance is an assessable asset under the asset test, and
- The balance is deemed, and the deemed income is assessed under the income test
If the balance of their pension is reducing, they may see their Age Pension increase provided the income is used for living expenses.
However, there is an exception for those that meet some grandfathered criteria:
- If an income stream was commenced before 31 December 2014, and
- The owner of the income stream has been a continuous recipient of income support payments from this date.
If these criteria are met, then there is a different Centrelink income test treatment for their super income stream. The income from this is not deemed, but rather a portion of the income payment received is exempt income, this is known as the deductible amount. Income amounts received above the deductible amount are assessed as income under the Income Test.
The deductible amount is calculated as follows:
Deductible amount (DA) =
Purchase price, less any commutations or capital withdrawals (PP)
divided by the relevant number (RN)
DA = PP / RN
For example, Greg purchased an income stream for $600,000. He has withdrawn $15,000 on top of his regular income drawdowns and his relevant number (based on his life expectancy when he started the income stream) is 18.
His DA is:
($600,000 – $15,000)/ 18
= $32,500 per annum
Any amount Greg draws from his income stream below $32,500 per year is not assessed under the Age Pension income test.
One thing to note though; the deductible amount will reduce if amounts taken from the pension are treated as withdrawals and not income.
If Greg transfers his balance to another provider and his income stream was deemed, assuming the same balance of $600,000, his assessed deemed income could be an additional $13,500 per year. However, he could draw as much from the income stream as needed without affecting his Age Pension under the income test.
It is generally a good idea to speak to your super fund or a financial adviser on your specific product and situation.
Q: As I am assessed on income for the Age Pension, will I receive increased Age Pension if I choose to reduce my account-based pension payments as allowed under the Governments temporary minimum pension drawdown rules?
A: Generally, no. The income received from your account-based pension does not impact the Age Pension.
As mentioned in the previous question and answer, if you have commenced an account-based pension:
- The balance is an assessable asset under the assets test, and
- The balance is deemed and the deemed income is assessed under the income test.
If the balance of your account-based pension is reducing, you may see your Age Pension increase. This is because there is a lower balance used to calculate the deemed income.
For example, if Ananya has an account-based pension and:
- The balance is $420,000
- She draws $21,000 per year
- Her assessable deemed income is $8,378 per year under the income test. This is regardless of the amount she receives.
If her pension value then reduces by $20,000 due to a combination of market movements and income payments, her deemed income assessed will reduce by $450 per year. This could increase her Age Pension by $8.65 per fortnight.
However, there is an exception for people who commenced income streams before 31 December 2014. For an explanation of the grandfathering rules and how they affect the treatment of pension income, see my answer to the previous question.
Q: My wife and I are both over 80, with assets of just over $800,000 (not including our home) and an income of less than $10,000 a year. We would like to know if we might be entitled to a full or part Age Pension. We are both Australian citizens.
A: Yes, you would be eligible for a part Age Pension under the assets test.
Based on assessable assets totalling $800,000 and the deemed income plus other assessable income of $10,000 per year, you could receive $136.80 each per fortnight in Age Pension.
The current thresholds to receive a full pension are:
Assets limit for the full pension
| Living arrangement | Homeowner | Non-homeowner |
|---|---|---|
| Single person | $270,500 | $487,000 |
| Couple | $405,000 | $621,500 |
If you remain below these thresholds, then you will receive the full pension and the Pensioners Concession card.
Assets limit for a part pension
| Living arrangement | Homeowner | Non-homeowner |
|---|---|---|
| Single person | $593,000 | $809,500 |
| Couple | $891,500 | $1,108,000 |
| Couple separated due to illness | $1,050,000 | $1,266,500 |
For more information see the following guides:
- Age Pension rates (March 2022 to September 2022)
- Age Pension calculator (updated July 2022)
- Am I eligible for the Age Pension?
- What concession cards are available for seniors and pensioners?
You would also be eligible for the Pensioners Concession card. Benefits of the card can include (depending on your state of territory):
- Discounts on medical prescriptions and doctor visits. You may pay up to $41.30 for most PBS medicines or $6.60 if you have a concession card.
- Council Rate Rebate
- Access to the no interest loan scheme for essential goods
- Discounts on energy, gas and water
- Discounts on energy efficient appliance and lighting replacement
- Discounts on Boat, Caravan and motor vehicle registration.
- Toll relief
- Free Drivers Licence renewal
- Discounts on public transport
- Free travel vouchers and regional seniors travel card
- Reduced parking fees at hospitals
- Discounts on specialised medical equipment
- Fishing Fee exemption
- Free entry to National Parks
In the ACT, the Pensioner duty concession scheme offers a one-off stamp duty concession which can be worth up to $8,680 for home purchases of $420,000.
In Tasmania, there are other less common or one-off concessions you might benefit from, such as Will and Enduring Power of Attorney discounts with the Public Trustee.
In South Australia, a personal alert systems rebate is available up to $200 per year plus $380 for installation.
Q: I was eligible to apply for the Age Pension in September 2017. Due firstly to commitments to aged parents, and secondly COVID 19 travel restrictions, l have been unable to apply. I receive a service and part pension from UK and I have been supplementing that income with proceeds from my house sale in Australia. Is there any way I can apply from overseas? I am currently in Vietnam and there have been no flights to Darwin where I live in Australia.
A: Under the current legislated rules, you are not eligible. There has been no special rules released for COVID 19.
Centrelink will allow for claims for the Age Pension if you are living in a country that is part of the International Social Security Agreement. Vietnam is not listed in this agreement.
Other things to be mindful of if you are able to claim the Age Pension from overseas is:
- You will need to supply specific information and paperwork depending on the country you are in.
- You will need to take the relevant forms and identification to the listed office in the country you are in. This needs to be stamped and verified before your Australian claim can be granted.
- Your amount may fluctuate depending on how long you’re away from Australia and the exchange rate.
This article was originally published on Age Pension Guide.
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